Palm Oil Inventories Climb in Indonesia as Exports Tumble


JANUARY 21, 2015

Palm oil stockpiles in Indonesia, the world’s largest supplier, probably expanded to a four-month high in December after a rally in prices curbed demand and exports tumbled the most since April.

Reserves may have jumped 8.9 percent to 2.45 million metric tons from 2.25 million tons in November, according to the median of estimates from four planters and refiners and one analyst compiled by Bloomberg. Shipments may have declined 14 percent to 1.97 million tons, while output may have dropped 12 percent to 2.07 million tons, the lowest level since February, median estimates show.

Mounting inventories and forecasts for record production in Indonesia and Malaysia, the top growers, may suppress prices that rallied 20 percent from a five-year low in September. Excess supply will be worsened by large crops of competing oilseeds, plunging crude prices and expanding output in other countries, according to Malaysian Plantation Industries and Commodities Minister Douglas Uggah Embas.

The rally “won’t last as crude oil prices continue to decline,” Derom Bangun, chairman of the Indonesian Palm Oil Board, said on Monday. Exports in December fell as “buyers bought quite a lot in previous months,” he said.

Futures tumbled 1.4 percent to 2,288 ringgit ($633) a ton on Bursa Malaysia Derivatives by 5:09 p.m. on Wednesday in Kuala Lumpur. Prices hit 1,914 ringgit in September, the lowest since 2009. Crude prices dropped almost 50 percent last year, eroding demand for palm as biofuel feedstock.

Production in Indonesia may rise to a record 31 million tons this year from 29.5 million tons in 2014, with output in January at about 2 million tons, Bangun said. Malaysia will also probably produce a record 20.09 million tons after 19.67 million tons last year, according to the Palm Oil Board.

Malaysia scrapped export taxes in September to boost shipments and prevent an increase in inventories. Indonesia followed suit after prices fell below the average used to calculate tariffs. Malaysia extended the waiver through February, and Indonesia may keep the zero duty for another month, according to the Indonesian Vegetable Oil Association.